Liquor Control Board Under Fire

OCEAN CITY — Local
liquor licensees are banding together in what could result in an attempt to
abolish the Liquor Control Board for Worcester County (LCB).

At the Worcester County
License Beverage Association (WCLBA) meeting on Tuesday, several license
holders spoke out against some of the recent practices of the LCB, including
unexpected price spikes and possible collusion, and were furthermore united in
their hopes to disband the quasi-governmental monopoly when reports surfaced
the money coming into the county this year was drastically less than last year.

Worcester County
Commission President Bud Church said this week he was informed that the
county’s take of the LCB’s projected net revenue of $110,000 was going to be a
mere $55,842, with the town of Ocean City getting roughly $22,661. In
comparison, the town of Ocean City’s take was upwards of $136,000 last year,
with the county reportedly getting $168,625.

The LCB is technically a
non-profit organization, which by law must hand over 50 percent of its profits
to the county, and the other 50 percent dispersed amongst the four
municipalities within the county. To date, the LCB reportedly has put $3.6
million into the local community since 2005.

Still, there is a
growing roar from local liquor licensees that the LCB has overstayed its
welcome in Worcester County and is no longer a viable entity for its future.

“In 2009, the County
Commissioners budgeted $400,000 for their contribution and what we ended up
getting was $168,000,” said Church. “This past year, we budgeted for $348,000
assuming that the economy would effect what was going to come in, and we got
55,000. When we saw that, our Chief Administrative Officer [Gerald Mason]
called down to the LCB and asked what the hell was going on and wondered if it
was a misprint. They simply said that the numbers were what they were and they
were struggling.”

Mayor Rick Meehan
believes that the “time is now” for the LCB to be abolished and thinks that
this time around, the result could me much different than previously failed
attempts in 1998 and 1976.

“The numbers don’t lie,
and it’s reached a point where I believe that private enterprise would benefit
from the LCB going away,” said Meehan. “Everyone points to the jobs that would
be lost if you abolish the LCB, but their reports show that there are only 24
full-time and 30 part-time people working. I think that taking them out of the
equation, would enable private enterprise to expand and make up for those jobs
and more.”

Church said that there
seems to be more and more justification for a newly energized campaign of sorts
to abolish the LCB.

“I think that when the
money was good and all the municipalities were getting big checks they could
get behind the idea of the LCB,” said Church. “Now that they are only getting a
mere fraction of what they used to get, and the company as a whole seems to be
losing money rapidly, people are starting to question whether or not it should
continue.”

In 2008, the LCB
reportedly brought in $14.7 million in total sales, with its net income listed
at a little more than $777,000. In 2009, their total sales were listed at $14.6
million, but their net income was $415,000, a 47-percent drop from the prior
year.

Yet, a figure that
seemingly appears to be raising even more eyebrows and enraging licensees and
elected officials is the fact that in that same time period when the LCB’s
revenues dropped $362,000, its payroll costs skyrocketed $220,000 and employee
bonuses increased by more than $20,000. The LCB also spent more than $35,000 in
travel expenses for their employees, which was up $9,000 from 2008.

Though the LCB is
technically an autonomous entity that is not under the county’s proverbial
umbrella, Church is concerned by the fact it gave bonuses and increased payroll
in 2009.

“In Worcester County,
we’ve stopped pay raises and paid travel and bonuses for the last 20 months,
and the fact that they didn’t is very concerning to me,” said Church, “I’m not
sure that the liquor business is a good business for the county to be in in
2010, and if you look at what the profits used to be and what they are now, you
have to ask yourself, ‘where’s the money?’”

Licensees are angry that
the LCB can seemingly change prices at the drop of a hat and are not
necessarily accountable to anyone, including the county. One local license
owner went as far as comparing the business tactics of the LCB to the “the
mafia”, while another compared their meager contribution to the county and
local municipalities to “a ruler who does what it wants and just gives a little
bit back to appease the peasants.”

Others state simply that
the LCB has become a middle-man that is governed by its own rules and that
businesses would be much better off dealing directly with wholesalers.

“They aren’t governed at
all, and that’s the main issue here,” said Harborside Bar and Grill co-owner
Chris Wall. “If we can’t trust them, then we don’t need them.”

In February 2008, the
average mark-up price for local licensees to buy liquor from the LCB, which
they are required to do, was 24 percent. The LCB then reduced the mark-up price
by 5 percent and that policy held true up until March of 2009, according to the
WCLBA. In December of 2009, the LCB arbitrarily raised the mark-up price 4
percent back to 22 percent, and, according to Seacrets Chief Financial Officer
Gary Figgs, who also is a board member of the WCLBA, “they gave us no notice
and no reason as to why they raised it another 4 percent.”

On June 7, LCB Executive
Director Brian Sturgeon sent Figgs an email stating that starting immediately,
“the LCB will no longer use the Beverage Journal as a basis for the cost of
wholesale. The actual cost will be the basis for wholesale, and wholesale will
be computed as 85% of the retail price consistent with Md. Law.”

According to Figgs, this
new policy caused the mark-up prices to fluxuate vastly (on average up to 26
percent), ranging anywhere from 25 percent for Grey Goose Vodka to 62 percent
for Captain Morgan Parrot Bay rum.

When confronted with the
sudden rise in prices, LCB Chair Don Hastings told several licensees, including
WCBLA President Doug Buxbaum that the price hike was a direct result of a
request made by the County Commissioners.

Church said that this
was in no way true and Hastings’ claim was an outright lie.

“At no point did the
County Commissioners tell the LCB to raise their prices to cover our or their
lost revenues,” said Church. “We have no control over them and we are trying to
be semi-patient with their refusal to release their current year financial
reports.”

In addition, The
Dispatch got access to a letter from Mason to Hastings, dated June 21,
2010, in which Hastings re-iterated that the County Commissioners had never
asked the LCB to raise its prices.

LCB officials were given
ample opportunity to comment this week, however, Hastings, who allegedly
handles all public comments for the group, was out of town on vacation.

“As much as I would like
the opportunity to go point and counterpoint about our practices, I am not in a
position to comment at this time, as I must defer to our board members, as that
is our policy,” said Sturgeon yesterday.

One board member for the
LCB, Joe Jackson, did return The Dispatch’s call, and although he deferred much
of the comment to Hastings, he did note that until the final financial numbers
were turned in, the LCB would “not comment on any financial figures from this
past year, or any year prior.”

Jackson went on to say
that the LCB had made cuts and the forthcoming financial report would show that
“the economy had a very big part in those numbers being down.”

Accusations of
inconsistent business practices, coupled with the fact that the LCB’s profits
have decreased so dramatically (between 2005-2008, the LCB’s payment back to
the community ranged from $700,000 to $900,000) have seemingly spearheaded a
new movement of sorts to try to convince legislators that the LCB, which is
only operated in four counties throughout the state, is no longer needed in
Worcester County.

“We all knew that this
time would come and I think the time is now,” said Meehan.

Church has requested the
presence of members of the LCB, including Hastings, at the County
Commissioners’ July 6 meeting.

“If there’s ever a year
to do this, the timing might be perfect,” said Church.

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